Victoria expands congestion levy area – what property owners and landlords should know
Recent legislative changes in Victoria will significantly expand the area subject to the congestion levy on off-street parking spaces, with the changes applying from 1 January 2026. The reforms are part of amendments to the Congestion Levy Act 2005 (Vic) introduced following the State Government’s 2024–25 Budget Update.
The congestion levy is an annual charge imposed on non-exempt off-street car parking spaces in designated parts of inner Melbourne. It is intended to reduce traffic congestion by discouraging private car use in areas close to the CBD.
Expansion of the levy area
From the 2026 levy year, the Category 2 congestion levy area will expand to include a number of inner-eastern suburbs and precincts, including Burnley, Cremorne, South Yarra, Windsor and parts of Richmond, Abbotsford and Prahran.
The levy will also increase significantly. From 2026 the annual levy rates are expected to rise to approximately:
- $3,030 per leviable space in Category 1 (CBD); and
- $2,150 per leviable space in Category 2 (surrounding inner suburbs).
These changes will capture additional properties that were previously outside the levy boundary and increase the annual cost associated with providing off-street parking.
What this means for property owners and landlords
Liability for the congestion levy generally rests with the owner or operator of the car park, although the cost may be passed on to tenants depending on the terms of the relevant lease.
Owners of commercial or retail property within the expanded area should consider:
- whether their property contains leviable off-street parking spaces;
- whether their lease documentation allows recovery of the congestion levy as an outgoing from tenants; and
- the potential impact of the increased levy on operating costs, tenant negotiations and asset value.
The changes may particularly affect retail and commercial buildings where parking spaces form part of the premises or are provided for tenant or customer use.
Disclosure considerations for property transactions and leasing
The expanded levy area also has implications for property disclosure and leasing documentation.
Property owners should ensure that congestion levy liabilities are appropriately addressed in:
1. Section 32 vendor statements (sale of land)
Where the property is subject to the congestion levy, the liability may form part of the outgoings affecting the land and should be considered when preparing vendor disclosure statements for purchasers.
2. Retail lease disclosure statements
For retail premises, landlords must provide disclosure statements that accurately set out estimated outgoings payable by the tenant, which may include the congestion levy where it is recoverable under the lease.
3. Lease documentation and outgoings provisions
Landlords should review their lease terms to confirm that:
- the congestion levy is included within the definition of recoverable outgoings, and
- tenants receive appropriate statements and estimates of outgoings where required under the lease and applicable legislation.
Failure to properly disclose outgoings or levy liabilities can expose landlords to disputes or limit their ability to recover those costs.
Preparing for the changes
With the expanded levy area commencing in 2026, property owners and landlords should consider reviewing their car parking arrangements, lease documentation and disclosure practices to ensure compliance and manage the financial impact of the new regime.
If you would like to discuss how the congestion levy may affect you or your business, please contact our office.
